For the first time in eight weeks, the government’s borrowing on the T-Bills market recorded a massive oversubscription.
The government’s T-Bills have been recording high investor pullback for about two months, leading to consecutive undersubscriptions, which threatened its ability to meet its recurring expenditure. Experts tell The High Street Journal that the low investor confidence was largely a result of the ever-falling interest rate on the bids, which made the instruments unattractive.
As a result, many investors abandoned the government bills in favour of the Bank of Ghana bills, which offered attractive rates.
But the story changed last week as bids submitted by investors were in huge excess of the target of the government. The latest auction report published by the Bank of Ghana reveals that the government planned to borrow a total of GH¢ 5.4 billion.
At the end of the auction, total bids submitted by investors amounted to a whopping GH¢ 20.9 billion. This represents an oversubscription of about 286%.
Majority of the bids came from the 91-day bill, with total bids amounting to GH¢ 13.8 billion. The 182-day bill accumulated a total of GH¢ 4.2 billion while the 364-day bill brought in nearly GH¢ 3 billion.
For the first time in many months, the government accepted bids that were in excess of its initial target. An additional GH¢ 5.2 billion was accepted as the government walked away with a total of GH¢ 10.6 billion, almost double its original target.
Interestingly, the massive oversubscription came amid a significant decline in the interest rate on all the bids after a marginal rise in the previous auction.
The interest rate of the 91-Day Bill declined from 14.6596% to 13.7276%, while that of the 182-Day Bill also recorded a drop from 15.0289% to 14.6164%. The 364-Day bill also saw a decline from 15.4192% to 14.7393%.
For now, it is unclear what motivated this “mad rush” for the government bills despite such a significant decline in the interest rate.
But this is good news for the government, as it was able to borrow more at a cheaper rate.
In the meantime, the government plans to raise a lesser amount of GH¢ 7.7 billion in its upcoming auction this week. Market watchers are closely monitoring the market to see if rebounding investor confidence will continue or it’s just a “nine-day wonder.”
